Long-term care insurance scams

Long-term care insurance can help make extended medical help affordable for many Americans, especially disabled seniors. It covers benefits not typically protected by Medicare and private health coverage. Some of these benefits include nursing home care, hospice, adult daycare and in-home medical equipment.

More and more people in their 40s, 50s and 60s are buying long-term care policies to help pay for these potentially large medical expenses if they arise in their later years.

Most insurance agents and insurance companies are honest and reputable. But long-term care coverage can be complex, confusing and expensive. Watch out for fraud and deception.

The Scams

Here are just some of the scams and abuses to watch for:

Selling unsuitable policies. Dishonest insurance providers knowingly sell expensive policies to people who can't afford the high premiums. Another scam involves selling two expensive and overlapping policies when only one is needed. Low-income people and seniors on fixed incomes often are targeted. Sales pitches may aggressively prey on people's fear that high medical costs will leave them destitute or a burden on family members.

Churning policies. You're urged to cancel a perfectly good policy and "trade up" to a "better" policy from your current insurer or another company. The replacement policy may be more expensive and offer little or no improvement. You're also forfeiting years of premiums you've paid for your previous policy. You also may be denied key benefits under the new policy based on pre-existing conditions if your medical needs have changed.

Deceptively watered coverage. To close the sale, the seller may deceptively eliminate or reduce vital policy features so you can afford the premium. You aren't told that critical benefits such as inflation protection were watered down or eliminated. Nor are you told how such changes could affect your medical care or expose you to high out-of-pocket costs.

Overstating benefits. You might be told the policy covers "all" of your long-term medical expenses. But this may not be true — read the policy's fine print. For example, does the policy adequately adjust current benefits for future inflation when you need care in future years? Are you aware of other stated policy limits and restrictions? If not, you may have to pay a large portion of medical expenses out of pocket.

Making misstatements on applications. Deliberate misstatements about your current medical condition, age, past medical history or other key information are entered onto the policy application to secure the coverage or lower the premium. Agents or policy applicants might use this fraudulent tactic.

Selling phony policies. Watch out for fake coverage, especially bogus home health care coverage. These schemes steal your premiums and leave you without vital protection when you need it the most.

The Price You Pay

• Your health and savings may be jeopardized if the coverage is bogus...cancelled due to misstatements on the application...lacks vital benefits you need...or doesn't clearly spell out policy restrictions that are later used to deny you benefits.

• You're burdened with expensive and possibly unneeded coverage you often can't afford.

• Your coverage may be cancelled if the application contains deliberate misstatements. You may be charged with criminal fraud if you made the misstatements or knew someone else had fraudulently filled out the application for you.

Fight Back

Do your homework before you buy. Ask questions, compare policies and prices, and learn all about the policies you're considering buying. Your health and financial security may depend on it.

Do you need long-term care insurance? This coverage is expensive, and many people can't afford it. The high premiums can drain your income and savings. You may also qualify for Medicaid if you need long-term care. Consult with a trusted advisor about whether you're in the right financial bracket for this coverage.

Ask the right questions. Ask your agent direct questions. You should receive clear answers. Back off if the agent seems ill-informed or evasive, pressures you to buy now, or is evasive (saying something like, "Don't worry, the details are all in the brochure."). Questions you should ask your insurance agent include:

• What's your expertise in selling long-term care coverage?

• What insurance companies do you represent?

• What services does this plan cover? Will it cover home care, assisted-living apartments, and nursing homes too?

• What daily benefits do you recommend for my policy? Why?

• How do I qualify for benefits when I need them?

• Will benefits increase every year to protect against inflation?

Check out the insurance company. Contact your state insurance department to see if the company is licensed in your state. Even if the insurer is licensed, make sure it's financially healthy. A.M. Best lists financial ratings of insurance companies.

Know what benefits you get. Know exactly what benefits you want from your policy, then carefully check the policy to make sure you're getting what you expect. Don't rely on TV ads with celebrity endorsements, slick marketing literature, a verbal say-so during the sales call, or written policy summaries you're given. You should rely only on the full policy itself.

Know the policy restrictions. Policies contain limits on what's covered, what isn't, and under what circumstances. Make sure the policy clearly spells out the criteria for qualifying for specific benefits, and that you understand the criteria fully. Rely only on the policy wording, not on sales pitches or marketing material.

Compare policies. Check out policies from different insurance companies before deciding. Never buy the first one you're offered - especially if you're pressured to buy. Also avoid buying on price alone. The cheapest policy isn't always the best value.

Avoid duplicate policies. Avoid sales pitches that say you need more than one policy ¾ you don't. One suitable long-term care policy is enough.

Get trusted outside opinions. Have a trusted friend, relative or credentialed financial advisor review the policy with you to make sure it meets your unique needs and ensure you're paying a fair premium.

Are the agent and insurer licensed? Make sure the agent and insurance company are legitimate and licensed in your state. Contact your state insurance department.

Fill out the application accurately. An insurer may deny a claim or cancel a policy if your application is inaccurate. Sign and return the application only after you've double-checked all information — whether you or the agent fill out the application. If you later find an error, notify the insurer immediately. Word of caution: Making serious and willful misstatements could be grounds for criminal charges of insurance fraud.

Never pay cash. Pay your premiums by check or debit or credit card; never use cash. Also make checks payable to the insurance company instead of the agent whenever possible.

Use the "free-look" period. Let's say you've bought the policy but now have second thoughts. By law, you can cancel the policy within 30 days and receive a full premium refund. (Don't think this is the case in every state.) Use this "free-look period" to re-check your coverage if need be. If you cancel the policy, notify the company by certified mail to prove you cancelled in time. Keep a copy of all documents you return.

Have you received your policy? If you don't receive your policy within 60 days, contact the insurance company immediately.

Avoid needlessly "trading up." If you're urged to buy a "new and better" policy than your current one, resist pressure for a quick switch. Compare the new and current polices closely to make sure the new coverage is exactly as promised, and is right for your needs. If you decide to switch policies, confirm the insurer has accepted your new policy before you cancel the old one.

Contact the authorities. If you think you've discovered a scam, contact your state insurance department right away. Have your complete facts, and in order. Make sure all relevant names, dates, addresses, phone numbers and other information are included. Provide any documents that support your complaint.